Richardson GMP readies latest liquidity push

Liquidity has been a much promised goal at Richardson GMP, a firm that defines itself as “an independent, leading-edge wealth management firm accountable to a very important group of people — our clients.”

So far, through two iterations, that goal has not been achieved, much to the chagrin of the firm’s brokers who, in exchange for selling their book of business to the money manager, received stock in a private company. (The second iteration took place when Richardson and GMP merged their retail operations in 2009, a move that required a recapitalization.)

Now the firm, which has not been able to achieve sustained profitability and which is owned relatively equally by James Richardson & Sons, GMP Capital and the brokers, is attempting version three. On the firm’s website, the importance of the brokers as investors is highlighted.“They’re all fully invested in Richardson GMP as owners, so they’ll ensure that the priorities of the business are fully aligned with your priorities.”

Related

The two major partners have put in place a plan to buy back 30% of the brokers’ shares over a three-year period. There are two limitations: The buyback is subject to a cap and doesn’t start until the end of next year. But if a broker agrees to the plan the other 70% is effectively placed in escrow and can be accessed in only a couple of situations, one of which is that the firm is acquired or goes public. Chief executive Andrew Marsh is travelling and couldn’t be reached for comment. The plan represents a continuation of a recent comprehensive review of operations at GMP. In that review, 51 employees who previously worked with GMP will become employees at Richardson GMP and doing the same functions as they were. Richardson GMP has reached “sufficient scale to assume direct ownership and control over critical support.”

For the brokers, the planned liquidity is another road bump. “It’s frustrating,” noted a former employee who came to the conclusion he had made a bad investment before accepting a package to join another brokerage firm. The bad investment decision took place because the value of the stock received by the brokers has fallen dramatically, by some estimates about 65%-75%. Meantime, those who put in the extra capital — in this case Richardson and GMP who have also invested in preferred shares — get more of the control and the financial rewards.

In the beginning, the liquidity event, presumably one of the reasons why the brokers joined, was to be achieved either through a sale or going public. That event, particularly in the case of the Richardson brokers, was originally scheduled to take place within five to seven years by which time the firm was expected to have $25-billion to $30-billion under management. Those plans came unstuck because of the global financial crisis. In 2009 when Richardson and GMP merged, the new firm had assets under administration of more than $11-billion spread among 114 investment advisory teams.

In its most recent quarter, the firm reported 110 advisory teams (up from 109 one year earlier) while assets under administration stood at $14.491-billion — vs $12.920-billion at the end of Sept 30 2011.

So what’s the effect of the buy-back? One industry executive said: “We understand that there’s not a lot of happiness and I believe that there will be a lot of movement over the next year from that firm.”

With the evolution of the lithium-ion battery and pending availability of an affordable electric vehicle, we decided it was a good time to produce a Ubika Battery Metals Index, comprised of 10 lithium and 10 cobalt companies.

Almost Done!

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.